(Alliance News) - The following is a summary of top news stories Tuesday.
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COMPANIES
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The EU launched a wide-ranging antitrust probe against Alphabet's Google over concerns that it is forcing out rivals in the highly profitable online advertising market. The probe will "assess whether Google has violated EU competition rules by favouring its own online display advertising technology services," a statement said. The move by the EU follows an antitrust overhaul package unveiled in the US Congress last Friday targeting Big Tech, if enacted, could have far-reaching effects on how people use the internet and on America's biggest and most successful companies. The five bills, due for a committee vote on Wednesday, could pave the way for a reorganization or breakup of giants such as Google, Facebook, Apple and Amazon.com, while reshaping the entire internet ecosystem. The measures would stop tech giants from operating a platform for third parties while offering competing services on those platforms, dealing a major blow to the likes of Apple and Amazon. Lawmakers also are seeking to ban tech firms from prioritizing their own products or services, with Google clearly in mind.
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Melrose Industries unveiled a GBP730 million return to shareholders after completing the GBP2.62 billion disposal of its Nortek Air Management division to Chicago-based Madison Industries. The FTSE 100-listed industrial turnaround firm said it will return GBP730 million to its investors, equivalent to around 15 pence per share. Back in April, it said it would return a portion of the net proceeds of the disposal to shareholders. Melrose said it is taking a prudent stance on the proposed capital return given "these unprecedented circumstances", but added that, should encouraging sector recoveries continue, the board expects to be able to make another "significant" return to shareholders next year. Nortek Air produces custom and commercial air solutions and was acquired by Melrose in 2016 for an enterprise value of GBP2.15 billion.
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Aston Martin Lagonda Global Holdings said it is suing a Swiss dealer, Nebula Project AG, over unpaid customer deposits for its GBP2.5 million Valkyrie 'hypercar'. The Warwick, England-based luxury car predicts a hit to both cashflow and earnings before interest, taxes, depreciation and amortisation of up to GBP15 million for 2021. Aston Martin has filed civil charges against Nebula and criminal charges against its board members to allow for the investigation of "any potential criminal behaviour" following the failure to pay some customer deposits for Aston Martin Valkyrie programme orders received by Nebula. The net financial impact will be "positive over time" but for 2021, cashflow and Ebitda will be hit by up to GBP15 million, which includes a GBP5 million provision of trade debtors.
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Steven Spielberg will produce multiple new films for Netflix every year, the company said Monday, in a major deal that highlights how fully Hollywood has embraced streaming platforms. The partnership with arguably Tinseltown's top director is a coup for Netflix at a time when competition with streaming rivals including Disney+ and HBO Max is heating up. It also follows reports that Spielberg had been skeptical about streaming in recent years, and had even moved to bar Netflix films from Oscars eligibility – claims that the legendary "Jaws" and "Schindler's List" director has since dismissed as false. In a joint statement about the Netflix deal, Spielberg praised "this new avenue for our films" as an "amazing opportunity to tell new stories together and reach audiences in new ways."
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Generali said it will acquire a majority stake in the AXA Affin joint ventures and plans to purchase 100% of MPI Generali. The Italian insurer said the total cost for the deal will be EUR262 million. AXA SA will net EUR140 million from selling its Malaysian operations. Generali has signed an agreement to buy a majority stake AXA SA and Affin Holdings joint ventures of AXA Affin General Insurance Berhad and AXA Affin Life Insurance BerhadGenerali will hold a 53% stake in AXA Affin General Insurance and 70% of AXA Affin Life Insurance - buying up AXA's holdings in the ventures. The Italian firm will also take full control of its own Malaysian joint venture, MPI Generali, from partner Multi-Purpose Capital Holdings Berhad. Generali then plans to merge MPI Generali and AXA Affin General Insurance.
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DS Smith reported declines in revenue and profit in the 2021 financial year, as the cardboard box boom was not enough to offset weak prices for paper. The London-based packaging supplier saw sales fall 1.1% in the year ended April 30, to GBP5.98 billion from GBP6.04 billion. Pretax profit dropped 37% to GBP231 million from GBP368 million. The company will pay a final dividend per share of 8.1 pence, bringing the total for the year to 12.1p. DS Smith had suspended its dividends in financial 2020, after paying out 16.2p in financial 2019. The FTSE 100 company said profitability was hit by the pandemic, particularly in the first quarter as packaging volumes fell and raw material costs were volatile.
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American Airlines cancelled more than 100 flights over the weekend and would trim additional trips next month, with the industry facing surging demand and labor shortages as the nation begins to emerge from the pandemic. The carrier cut 150 flights on Saturday, including 90 in advance. It also expects to remove about one percent of its scheduled flights from the July schedule. An "incredibly quick ramp-up of customer demand" has been further complicated by bad weather at large hubs, an American spokeswoman said in an email. The airline is "adjusting a fraction of our scheduled flying through mid-July" in light of these issues and labor shortages at some of its vendors, the spokeswoman said.
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MARKETS
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European markets were largely treading water ahead of US Federal Reserve Jerome Powell's testimony before Congress at 1900 BST, though the dollar earnings-heavy FTSE 100 index was outperforming peers on sterling weakness. "It appears that investors are now pausing and looking for further direction from the American central bank," said Ricardo Evangelista at ActivTrades, adding that the tone of Powell's address "has the potential to either reignite the dollar rally or halt it."
Powell's appearance before the House Select Subcommittee on the Coronavirus Crisis comes less than a week after the US central bank moved up its timeframe for lifting interest rates to 2023. On Friday, St Louis Fed President James Bullard sent stocks in New York tumbling after he told CNBC that "I think it's natural that we've tilted a little bit more hawkish here to contain inflationary pressures."
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CAC 40: down 0.1% at 6,594.21
DAX 30: down 0.3% at 15,556.65
FTSE 100: up 0.2% at 7,076.10
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Hang Seng: closed down 0.6% at 28,309.76
Nikkei 225: closed up 3.1% at 28,884.13
S&P/ASX 200: closed up 1.5% at 7,342.20
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DJIA: called down 0.1%
S&P 500: called down 0.2%
Nasdaq Composite: called down 0.2%
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EUR: down at USD1.1884 (USD1.1915)
GBP: down at USD1.3864 (USD1.3915)
USD: up at JPY110.46 (JPY110.15)
GOLD: down at USD1,778.50 per ounce (USD1,786.00)
OIL (Brent): up at USD74.40 a barrel (USD74.21)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The US economy remains on a positive trajectory even as it contends with higher inflation, according to congressional testimony released Monday by the head of the Federal Reserve. Fed Chair Jerome Powell, in prepared remarks ahead of a House hearing Tuesday, reiterated that the central bank will continue its supportive stance to ensure that the "sustained improvement" since the depths of Covid-19 pandemic is extended. The labor market has improved, but progress has been "uneven," said Powell, in remarks consistent with his response to questions at a news conference last week. "We at the Fed will do everything we can to support the economy for as long as it takes to complete the recovery," Powell said in the testimony. Powell acknowledged that inflation has "increased notably in recent months" due in part to higher oil prices and the hit from supply chain disruptions. But he restated that higher prices are due to "transitory" factors, adding that "inflation is expected to drop back toward our longer-run goal."
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Covid-19 deaths in the US have dipped below 300 a day for the first time since the early weeks of the disaster in March 2020. And the drive to put shots in arms hit another encouraging milestone Monday, with 150 million Americans fully vaccinated. The coronavirus was the third leading cause of death in the US in 2020, behind heart disease and cancer, according to the Centres for Disease Control & Prevention. But now, as the outbreak loosens its grip, it has fallen down the list of the biggest killers. CDC data suggests more Americans are dying every day from accidents, chronic lower respiratory diseases, strokes or Alzheimer's disease than from Covid-19.
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As the Covid pandemic recedes dramatically in the West, Europe is opening its doors to Americans – but the reverse is not holding true, with the US not budging on restrictions imposed 15 months ago. US President Joe Biden has hailed progress on vaccination, with a goal of reaching 70% of Americans with at least one dose by July 4, and health authorities have eased recommendations on masks, but the language on travel restrictions has remained constant. "We look forward to the resumption of transatlantic travel as soon as the science permits," State Department spokesman Ned Price said Monday. "I'm not able to put a specific timeframe on it, only because it will depend in large part on the course of the epidemiology, on the response to the virus around the world, and developments, including the impact and the presence of variants," he said.
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The UK government is "working on" plans for quarantine-free travel for fully vaccinated Britons but international travel remains a "difficult" area, Matt Hancock has said. The health secretary confirmed that ministers are looking at how to scrap the requirement for people to isolate for 10 days on return from an amber list country. He said he is "in favour of moving forward in this area" and replacing quarantine with daily testing. "This hasn't been clinically advised yet – we're working on it," he told Sky News. "We're working on plans to essentially allow the vaccine to bring back some of the freedoms that have had to be restricted to keep people safe." Speaking on LBC radio, he said the government is being "cautious about international travel" in order to protect the progress at home.
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UK government borrowing fell in May as Covid-19 curbs eased, figures from the Office for National Statistics showed. The public sector net borrowing figure for the month remained stubbornly high, however, with the latest number being the second highest May total on record. According to the Office for National Statistics, public sector net borrowing was GBP24.3 billion in May, trimmed from GBP43.7 billion a year earlier. In April, the figure amounted to GBP28.3 billion. In May, public sector net debt stood at GBP2.196 trillion, around 99.2% of gross domestic product. This was the UK's chunkiest debt to GDP ratio since recording 99.5% in March 1962. In April 2021, the figure stood at 98.5%.
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Sydney was battling a fresh Covid-19 cluster on Tuesday just as Melbourne's latest outbreak receded, highlighting Australia's difficulty in quashing persistent small virus flare-ups. Ten people were diagnosed with Covid-19 in Sydney overnight, taking the cluster that first emerged in the city's Bondi Beach area last week to 21 cases. New South Wales state Premier Gladys Berejiklian said health officials expected the outbreak in Australia's most populous city to continue growing in the coming days, after several people were infected in just "fleeting" non-physical contact with a case in a cafe and a large shopping centre. In response, the government has reimposed mandatory mask-wearing in public transport and retail outlets across much of greater Sydney, but it has stopped short of ordering a lockdown.
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By Lucy Heming; lucyheming@alliancenews.com
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